As per a draft Electricity (Amendment) Bill, 2025 put out by the power ministry, the amendments seek to fully eliminate cross-subsidy for manufacturing enterprises, the Indian Railways and metro railways within five years after the Act is amended.
The draft was issued late on Thursday. Stakeholders can submit their views on the proposals within 30 days.
The proposals address the impact of cross-subsidy, which inflates industrial tariffs, reducing the competitiveness of Indian manufacturing and constraining MSME growth, the power ministry said.
According to the ministry, despite major structural reforms under the Act, such as unbundling of utilities, promoting competition and open access, the distribution segment continues to face severe financial stress, with cumulative losses exceeding ₹6.9 lakh crore. Regulatory delays have further weakened the sector’s financial viability, while cross-subsidy-induced high industrial tariffs have impacted industrial competitiveness and constrained economic growth, the ministry said. Under the proposed amendment, state governments will retain flexibility to provide advance subsidies for specific consumer categories, it said.
Multiple distribution licensees could be allowed to supply electricity using shared networks, reducing duplication of infrastructure. Currently, though multiple licensees are allowed, the limitation is having their own distribution networks. “The proposal will ease the entry and operation for multiple licensees,” according to an industry executive.The proposed changes mandate state electricity regulatory commissions to determine cost-reflective tariffs and allow them to revise tariffs on their own to ensure annual implementation instead of waiting for utilities to approach them. The proposal seeks to amend the Electricity Act, 2003 and call it the Electricity (Amendment) Act, 2025.
Other key proposals
Currently power distribution licensees are bound by a universal service obligation (USO) to supply electricity to all consumers, including those eligible for open access. The government has proposed state commissions may exempt them from the USO for consumers eligible for open access to avoid procuring additional, often costlier, power that increases fixed costs and pushes up tariffs for other consumers.
The government aims to establish a uniform minimum standard of service across the country and allow state commissions to set higher service standards based on local needs.
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